ARGENTINA Law and Practice Contributed by: Juan McEwan and Agustín Lacoste, McEWAN
that is imposed on the local resident who administers the asset owned by the foreign national. Such person must submit and pay the tax return (“substitute tax - payer regime”). The applicable fixed tax rate is 0.5% and there is no tax relief allowed. Provincial Real Estate Tax In addition, provincial real estate tax must be paid annually, in one or several instalments, in the months of February, April, June, August and October. By way of example, the tax in PBA comprises a fixed amount (from ARS455 to ARS700,551) and the tax rate to be applied on the surplus of the established minimum of the scale ranges from 1.2% to 2.5%, depending on the type of property and the fiscal valuation carried out by the Land Registry and Territorial Information Service. Tax on Rental Income If the property is rented out, the tenant should with - hold tax at an effective rate of 21% (the ITL presumes that 90% of the rent is the net income and applies a 35% tax rate). If the property is to be rented for com - mercial purposes (ie, it is not to be the tenant’s home), VAT would apply at a rate of 21% of the rental value. As for PAT, the law provides a substitution method for the collection of this tax, which is imposed on the local resident designated by the non-resident for this purpose. Such person must submit and pay the tax return. Transfer Tax and Stamp Tax As regards onerous transfers of real estate, PIT applies to the extent that the real estate was acquired by the non-resident on or after 1 January 2018. Where the real estate being sold was acquired by the non-resi - dent prior to 1 January 2018, a 1.5% withholding tax (ITI) will apply, although the non-resident could still qualify for the exemption if certain requirements are met (see 1.1 Tax Regimes ). In addition, the deed of sale of the real estate is subject to stamp tax – the rate of which will depend on where the real estate is located, as each province sets a specific rate within its own provincial tax code. By way of example, in the Autonomous City of Buenos Aires, the tax rate for the transfer of ownership of real estate is 3.5% on the economic value of the contract. Where a non-resident receives income on the sale or transfer of shares or
other interests in foreign entities, and the value of this derives at least 30% from assets located in Argentina (eg, real estate), this income will be taxed in the same way as capital gains. Gift/Estate Tax Gratuitous transfers during the non-resident lifetime (gift) of real estate situated within PBA will be sub - ject to ITGB. If the gratuitous transfer derives from the death of the non-resident (inheritance), court fees derived from the succession proceeding will also apply (ranging from 1.5% to 2.2% of the value of the property). Fideicomisos (local trusts) are commonly used struc - tures to defer ITGB and avoid court fees. If the prop - erty is situated outside PBA, gifting the real estate could be an alternative (the donor may keep lifetime usufruct over the given property). 1.6 Stability of Tax Laws Stability is not a quality that is readily associated with Argentina, and the country’s tax legislation is no exception to this. This can clearly be seen by the changes made to PAT in recent years, which can be summarised as follows. • In May 2016, the National Executive Branch sent a draft bill to Congress, which included a tax amnes - ty, a moratorium, and staggered modifications in the non-taxable minimum amounts and rates of PAT. The bill contemplated the abrogation of PAT as of 1 January 2019. • Law 27.260 (22 July 2016) introduced staggered modifications in the non-taxable minimum amounts and rates of PAT. The abrogation of this tax was finally set aside. • Law 27.429 (22 December 2017) established the fiscal consensus reached by the federal govern - ment, the provinces (except San Luis) and the Autonomous City of Buenos Aires. It was aimed at implementing tax policies designed to promote and increase investment, as well as private employ - ment, through a reduction in the fiscal burden of taxes with a distortive effect on overall economic activity. The other side of the obligations assumed by local jurisdictions was the commitment not to
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